Quote:
Originally Posted by Rekna
This makes no sense to me....
Assume we have a tax credit of $1000 and a tax rate of 10%. (the numbers are chosen to be small and simple on purpose and not representative of real numbers)
Family A) makes $900 and they get the tax credit for $100 for a total net income of $1000.
Fmaily B) makes $1100 they get no tax credit and pay taxes on $100 for a total tax liability of $10 for a total net income of $1090.
According to your argument a couple of things are true:
1) Family B would rather be Family A because they pay less taxes even though they have less income.
2) Family A would rather not make more than $1000 because it means less tax liability. Thus if Family A were offered a $200 raise they would say "thanks, but no thanks".
3) The world is flat.
-----Added 25/8/2008 at 05 : 52 : 10-----
look at the graph at the bottom of the link you posted:
http://www.taxpolicycenter.org/Uploa...es_summary.pdf
it says that 4/5ths of Americans will have more after tax income with Obama than with McCain. Are you claiming these people would rather pay more taxes as long as their marginal rate was lower?
-----Added 25/8/2008 at 05 : 54 : 36-----
Let's take a quick straw poll. Everyone reading this please tell me if you which of these you would prefer:
A) To pay more total taxes or B) to have a higher marginal tax rate? |
There are two different issues on the table.
1) People who will receive a net tax cut will be better off. However, Obama's plans for tax rate cuts are targeted. His plans for tax credits and special deductions are targeted. If you are in a situation to benefit from his targeted tax cuts you benefit. So, for example, if you are a senior citizen and you are actually paying taxes, and you make less than $50,000 you will win, assuming the increase in capital gains tax rates don't offset your savings (of course this depends on the details). And, Obama is going to be raising some taxes or tax rates for example the middle class family ( let's say a teacher and a fire fighter perhaps making a combined $100K+) they may not benefit from Obama's targeted tax cuts and may pay more in payroll taxes and capital gains taxes. This is the primary question, and we need details. right now all we can do is make assumptions.
2) Tax rates are supposed to be progressive. The higher the income the higher the marginal tax bracket. Obama's plan is to raise the top tax rate to about 37%. So for each additional dollar made after a certain point a "rich" person will pay $.37 in taxes. Fair or not the story is to roll back the Bush tax cuts for the "rich". However, what we find is that marginal tax rates on the poor may be as high as the marginal tax rate on the "rich". So, in some cases our tax system may not be progressive, but may end up being regressive. This is an unintended consequence of convoluted tax policy.
So we end up with a poor family with an opportunity to do better financially. What happens? They pay 34% to 39% of each additional dollar earned to the federal government in income taxes. The pay about 7.5% in in payroll tax. They may pay a state income tax, let's say 5%. Then let's say they no longer qualify for free school lunch ( 2 kids x $2/lunch x 30 weeks = $600). Let's say they no longer qualify for free day care ( 1 kid X $300/week X 50 weeks = $15,000). Let's say they drive to work ( 20 miles per work day @ 30 mpg @ $3.50 per gallon = $583). Let's say they are forced to belong to a union and have to pay dues ($10 per week x 52 weeks = $520), etc.
Assuming, and I do, that most people can do basic math, at what point does it make sense to choose work, given the marginal costs? Especially when the majority of the additional costs are additional taxes and the loss of tax credits and special deductions.
Obama and the democrats have tax policies designed to have a perpetual class of poor earning sub-livable wages. They pretend to be against poverty, but they are in the poverty making business. I think the ones who understand - lie. I think those who have not thought it through - just don't know the implications of what they support.